Saturday, November 14, 2009

Monumental Oil Scam Robbing Consumers Every Day

Investor and consultant Phillip Davis has written about a giant global oil scam amounting to some $2.5 TRILLION.

Davis notes that investment giants Goldman Sachs, Morgan Stanley, Deutsche Bank and Societe Generale teamed with oil giants British Petroleum, Total, and Shell to found the Intercontinental Exchange (ICE) in 2000.

The ICE is putting billions of dollars into oil futures contracts without ever taking delivery of the oil. It's nothing more than a shell game.

"They just ratchet up the price with leveraged speculation using your TARP money," writes Davis. "This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel."

In 2003, Congress discovered that ICE was facilitating "roundtrip trades," in which one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever changes hands.

This indicates demand to the market, which pushes up the price. Yet, it amounts to nothing more than smoke and mirrors.

Over the course of an average month, 5 BILLION barrels of oil are traded on the NYMEX. A fee is collected on every single transaction, and this is ultimately passed down to US consumers. Yet, less than 40M barrels is actually delivered. That is just 8 tenths of 1 percent of actual demand for the product being traded. So, 99.2% of the oil transaction fees being paid by the American people amount to nothing more than fees for traders and record profits and bonuses for the trading firms.

"Before ICE, the average American family spent 7% of their income on food and fuel," writes Davis.."Last year, that number topped 20%. That’s 13% of the incomes of every man, woman and child in the United States of America, over $1 Trillion EVERY SINGLE YEAR, stolen through market manipulation. On a global scale, that number is over $4 Trillion per year."

This amounts to a truly massive scam, an epic scam.

ICE members Total and JP Morgan are currently storing 125 million barrels of oil in offshore tankers. That amounts to 15 days of US imports that have been ordered, but not delivered.

Speculators have stockpiled the equivalent of 1.1 million barrels of oil via the futures market. That amounts to eight times the amount added to the Strategic Petroleum Reserve over the last five years.

There is an extraordinary amount of manipulation going on in the oil markets, and consumers the world over are being gouged by all of this illicit behavior.

There is no oversight and no regulation. We're all being robbed.

Back in January, 60 Minutes ran a similar story, noting that oil speculation seemed to be fueling wild swings in oil prices. That can be seen here.

To read Davis' article, click here.

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